While market volatility causes uncertainty, its occurrence is actually a certainty. This series of articles provides insight to help put volatility into perspective.
Market corrections can be unnerving to investors trying to understand if the decline is a shorter-term pullback or the beginning of a sustained downturn.
Shorter-term declines or ‘market corrections’ happen frequently and can trigger the fear of a bigger market decline – but most don’t actually result in a bear market, a decline of 20%.
Based on Ned Davis Research data of S&P 500 Index performance between January 1928 and October 2018.
So why do some investors still buy high and sell low?
Equity fund flows show investors pulling out of the market when the index falls and money being invested as the markets rise.
Source: IFIC Primary View and Morningstar Direct, as of March 31, 2019. This is a hypothetical example, for illustrative purposes only. All values are in Canadian dollars. You cannot invest directly into an index.
Investors know intuitively to buy low and sell high – but even the most seasoned investors can find their own emotions affect the decision-making process.
Market volatility or declines often make people nervous and they can react by pulling their money out of the market.
Similarly when markets have persistently gone up, investors often buy in at the wrong time.
Staying focused on the long term can help investors tune out the noise.
A financial advisor can help you understand current market events and help you understand how they may impact your investments and your plan. If you’re concerned about market volatility, contact your financial advisor.
The commentaries contained herein are provided as a general source of information and should not be considered personal investment or tax advice. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change investment decisions arising from the use or reliance on the information contained here.
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